US LNG Imports 'Not a Game Changer' for Poland – Specialist

Polish company PGNiG has inked two long-term contracts for the annual supply of about two million tons of liquid natural gas from the US for the next 20 years, which is equivalent to 2.7 billion cubic meters of natural gas after regasification.

Poland will buy the LNG under the Free on Board (FoB) formula, meaning the seller pays for loading and the buyer pays other costs to the destination.

In an interview with Sputnik, Rafal Zasun, Editor-in-Chief of the website “Wysokienapiecie.pl” (“High Voltage”), said that even though the price for the US liquefied gas has not been announced, it is clear that it will be higher than pipeline gas.

“What is important, however, is that the contract has been signed for 20 years. As far as I know, the contract which Poland currently has with Gazprom expires in 2022. How much Russian gas will cost in 2022 is anyone’s guess. It makes no sense comparing the price written down in the contract signed years ago with the current one,” Zasun said.

He added that the price should be compared with the one now listed on European exchanges, where it has gone through the roof. Additionally, the two million tons will not be that important for the Polish market in comparison to the “reverse” gas the country is getting from Germany.

“If someday we want to stop getting gas from Russia, we’ll have to fill the void with ‘reverse’ gas from the West. It will be the same Russian gas, but provided though different arrangements, not on a long-term basis. It’s strange that Gazprom still sticks to long-term contracts,” Rafal Zasun said.

When asked whether the US LNG would be able to meet Poland’s growing demand, which is now in the ballpark of about 18 billion cubic meters a year, compared to the 2.7 billion it is going to receive from the US, Zasun said that regardless, Poland one way or another will get gas.

“I don’t know whether they will sign an intergovernmental agreement. I don’t think we need it. The gas market is self-sufficient. The Germans have no government contract and they are buying gas from Russia. It is something for the business community to decide. We could get Russian gas directly from Russia or from German or Austrian hubs, that is, via reverse, without any contract with Gazprom."

When asked if the contract with the US means that Warsaw plans to stop buying gas from Gazprom, Zasun said that two billion tons are not a “game-changer” and once the contract with Gazprom runs out in 2022, Poland will have to buy elsewhere.

“I don’t know if this is going to be a new contract with Gazprom. Maybe this is going to be natural gas from Norway coming via Germany. I don’t know if there will be a Baltic pipeline. If they build it then we’ll be getting considerable amounts from there I don’t know exactly how much though,” he noted.

He added that Germany will ramp its natural gas imports because it will have to make up for the closure of the country’s nuclear and coal-fired power stations.

“Poland will be able to import excess gas from Germany. The government has suspended gas imports by private companies, but when the ban is lifted, they will be able to supply large amounts from Germany. This is a good signal because it opens the market and promoted competition which in turn, will be good for Poland’s industry,” he concluded.

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